Who's spinning whom?

Not only is real estate local -- it's completely individualized to the buyer's and seller's own financial and other life situations. Today may be a great time for Jane Doe to buy but a terrible time for Jane Doe's sister to buy, regardless of where each lives.

Of course, our readers already know this, having worked side by side with all sorts of buyers and sellers over the years.

The differing points of view on today's market and the $6 million question, "Is now the right time to buy"?" are still fascinating.

On Thursday, Inman News published a letter to the editor responding to an article written by Dian Hymer, "Is buying a home today a good investment?" Hymer is a veteran agent in the San Francisco East Bay and has been writing a syndicated column for Inman News for many years.

In her latest installment, Hymer ponders this question she gets from today's buyers and advises:

"Buying a home is still a good investment if you can afford it, if you are ready to put down roots in a community, and if you want to invest in your personal happiness. Profit potential shouldn't be your only reason for buying a home, even though in most cases your home will appreciate in value if you maintain it and if you own it long enough.

"The housing market, like any economic market, is cyclical. There are periods of robust activity followed by periods of sluggishness. Prices can go down as well as up. Now that the market has softened in most areas, it's time to look at owning your home as a way to gain control over your personal domain -- not as a source of quick cash."

One reader, Erik Gartzke, an associate political science professor at the University of California in San Diego, who likely caught Hymer's article in his local newspaper, strongly disagreed.

"By any reasonable measure (expected trends in prices, the ratio of rents to mortgage payments, the ratio of incomes to mortgage payments), now is a phenomenally and historically BAD time to buy. Smart buyers will wait until smart sellers lower prices to conform to reasonable income multiples.

He continues: "This is just wrong. All of the reasons to buy are made better by waiting a year or two (or more) for prices to fall. By definition, an "investment" is something that will appreciate in price or pay a dividend. Neither is expected to be true in the next few years for housing."

As you can imagine, readers who were paying attention wrote in to rebut.

Jay Barnes, a Realtor with Keller Williams in New Bern, N.C., said:

"For Professor Gartzke to make a sweeping statement like, 'this is a historically BAD time to buy a house,' is simply wrong. It's like saying that the economy will never get better again – of course it will. Have we hit bottom yet? Who knows? And in real estate, it depends. In some areas of the country, prices never fell (NC Mountain area.) In others, prices have bottomed and are expected to rise this coming year (NC Outer Banks.) There are good values to be had in various parts of the country right now; mortgages are still low but may rise, inventories are strong – offering better choices and incentives.

"Certainly, some areas of the country may not have hit bottom yet, and Southern California’s market will be complicated by the recent tragedy of the fires. But it's statements like the professor's that further illustrate why a buyer needs a Realtor, not just a salesperson. Dian Hymer’s point is very well made. There are many reasons to buy property. But far and away, the primary one is still as a principle residence."

And Bill Fooks, a Realtor with Coldwell Banker Residential Brokerage in Coventry, R.I., said:

"You should always buy based on your income stream, not on some 'magical mortgage' product. We have undisciplined lenders lending to undisciplined buyers. We are now experiencing the results of this. In the process, the people who live in these houses, and are being forced out because of foreclosures, will still need a place to live. This will slowly push rents up, which in turn will have people thinking of buying again."

One positive outcome of this downturn surely will be a return to seeing a house as a primary residence and a way to take control of your personal domain, as Hymer points out. One could argue that the rampant behavior of spec buyers, flippers, spec builders, and those cashing in on their homes like ATMs that contributed to this downturn in the first place. (This leaves out the subprime meltdown and associated headaches, which we know have their place in this blame too.)

Comments

Professor Gartzke's statements epitomize the old adage, "Those that can do, those that can't teach."

I for one am in complete agreement with the professor.

In California, Nevada, Arizona, and Florida, you'd be foolish to buy as compared to rent. Anyone that would advise someone to buy in a market of declining prices when rental rates are at 50% or less of ownership costs should have their head examined or mouth taped shut. With foreclosures OVER THE NEXT TWO YEARS expected to explode, lenders and auction sales (not to mention short sales which realtors are now becoming proficient at) prices will continue to decline in these markets.

Manhattan prices will fall next year as big time bonuses come to an end.

Across the country, speculative purchases driven by piggish mortgages (driven by Wall Street banks) have pushed inventories to historic highs, much greater than other previous downturns.

As the condo high rises are completed in Chicago, Denver, Austin, and the DC Metro, watch for prices to tumble on that product type. The midwest has been pummeled by job losses and falling values.

The recession has begun in many states already, although government data necessary for official confirmation is 2-3 quarters away.

When will it be a good time to buy again? Let me answer that because my income to support my family does not drive me to misinform.

It won't be a good time to buy until median household price is 3-4 times median household income, or, until monthly rental costs are 80-100% of ownership costs. There "ya go!

I've never heard a realtor not say "it's a good time to buy". Whether recession, oversupply, ridiculous cost of ownership, or declining prices, it's always a "good time to buy".

Regarding the previous post above mine, those that "do" when it comes to real estate sales passed a one week course and paid a few hundred bucks, something any waitress or night desk clerk could do. Try getting a position as a coillege professor with those "highly esteemed" credentials. Thank God we have individuals like the professor to teach your children, instead of looking for the fast and easy buck in being a "realtor".

That's why the general public now views realtors as having less credibility than used car salesmen. See...It's always a "good time to buy a used car, too".

Every buyers situation is unique for both investors and primary residence purchasers. For many who have good credit and a large down payment now is the perfect time to buy as there are great deals out there. Not to mention some markets have not felt a decline in value and nor will they. Yes the prices in many markets will still fall, but rents in those areas will rise and anyone looking a 5 to 10 year investment stategy may find now an excellent time to buy.

Real Estate is the only investment class where you get to spend money you are already have to spend and you get a tax break to buy and a tax break when you sell.

Big to do about nothing.

Forget professors and attorneys. Historically are both wrong. Usually they jump in when the market is hot to make a quick buck and gain some recognition. The truth is that the real estate market for many reasons (it doesn't matter pick one you want) has out priced it self.

People CANNOT REALLY EFFORT TO BUY A HOUSE.

No matter what kind of "creative" financing is been used, houses are too expensive for the average buyer.

If the average income in the US is about $45,000 how one can effort the average price of today’s house? There is no math that would make that work.

If you look the history of the market from the 70s to today, this is NOT a good time to buy, if one has profit and immediate appreciation as main criteria.

What one should or must have as a criteria in entering the market is not an use to discuss, as people have a cattle mentality most of the time (stock market and the "new economy" mid 90s).

Housing is what it is, a house to live in. A car is to be driven. Period.

Now if for some reason appreciates in value that a secondary consideration. I know some of you will scream this is a poor example (appreciating/depreciating asset) but many homes have depreciated and many cars have super appreciated. This is not a text book case. Markets are dynamic not static. Forget all that junk of standardization that you have learned in school, they do not apply to real life.

My bet is ( if history repeats it self and ALWAYS does), that the real estate market is going to go much lower (40% at least) before it levels.

I think the 90s are here again. You can argue that circumstances are different today, from the academic point of you, but if you look closely, with an open mind you would find that circumstances are the same.

There would be a shifting in wealth and many people are going to loose big (as many have gained big), until the market comes to an affordable level again.

A good real estate broker/agent would always find him/her self busy and productive, as people always buy and sell.

The ones that going to disappear are the opportunists, that come in to the market for a quick buck, the discount brokers, the speculators, the "experts", the gurus", the “innovators”, the predatory lenders and all these people/entities that had no business been in this business.

That's rich! Realtoz warning against making "sweeping" statements about real estate.

We hope that you are able to find some wisdom in all of this. We at the YouInParkCity group will do our best to present things to you in an unbiased manner. Our love for the Park City area makes this hard to do at times, but this is where our work as a team can be a benefit to you. Our differing viewpoints, partnered with yours, add to our strength.

Information herein, although deemed reliable, is not guaranteed & is subject to change. Buyers to verify all property details to their satisfaction. Trade/service marks property of Keller-Williams & respective groups.
© 2006 the "You in Park City" Realty Team